Hope for the Newspaper Industry?

The NPR-Station Business Model Must Live Up to Its Original Intent or Change

In the discussion about new media, too little attention is paid to new revenue models. Even less attention (almost none, in fact) is paid to the expense side of the equation. That has to change if stations are going to come close to reaching just one or two of the goals laid out by the Grow the Audience project. It has to change for many stations to survive the turbulence of shifting media consumption patterns.

Outside of personnel costs, the fees for NPR newsmagazines are often the biggest chunk of a station's budget. As noted in our last posting, those costs are a bigger burden than ever.

NPR charges stations for Morning Edition, All Things Considered, and Weekend Edition based on how much listening those programs generate for each station. There are three key concepts behind that pricing model.

1. Every hour of listening to NPR News has a financial value to the station. More listening creates more revenue potential for the station from listeners and business underwriters.

2. NPR has an incentive to help stations increase listening and local revenue potential. More listening to NPR Newsmagazines means more money for NPR.

3. NPR has a disincentive to cause listening to go away from stations. Causing stations to lose audience means less money for NPR.

On the surface, this pricing model is ideal for the new media marketplace. Here's why:

NPR is now aggressively trying to get listeners to use its mobile apps. A mobile app is, in essence, a radio station. So NPR is asking listeners to bypass local stations.

We've covered the bypass issue before. Ultimately, bypass is about listener choice. Listeners will gravitate towards the best listening experience. If NPR is offering a better experience than stations, they will go.

If NPR sticks to the original intent of the current pricing model and audience for the newsmagazines at stations goes down, then NPR would collect less money from stations. That's the way it should work but history suggests it won't happen.

The pricing model was never properly implemented and the adjustments made by NPR over the years -- from capping station prices that were too high to changing the price points on listening -- have not been true to the intent of the model. NPR just toyed with the numbers until everyone was reasonably happy or at least willing to live with their program fees.

It is still not a given that more listening to NPR apps will result in less listening to stations. If it does cause station audiences to drop, then stations are going to have to pay NPR less money. Otherwise NPR will drive many stations out of business. Those that survive will have very few resources to invest in local programming and other goals laid out by the Grow the Audience project.

It will be interesting to see if NPR will actually live up to the intent of its current policy -- that it will trade cash from stations for listening through its apps -- or whether it will change the rules of the game when the current rules are no longer convenient.

The Financial Burden on Stations Grows

Fifteen years ago, the cost of NPR Newsmagazines was capped at 10.2% of a station's total revenue. Today, under a different pricing model, the NPR Newsmagazines eat up as much as 19% of a station's total revenue.

That's gross revenue. A more instructive story is told when the price of the NPR Newsmagazines is compared to the station's net cash revenue -- the revenue left after the cost of fundraising is accounted for. That number varies by station but is typically around 25%. One out of every four dollars an NPR News station spends each year is on the NPR Newsmagazines.

This is an extraordinary investment for stations especially when they are trying to find money to produce more local programming and expand to new platforms. It also reminds us that the financial issues facing public radio are as much on the spending side as on the fundraising side.

In our next posting, the financial implications of listeners leaving stations to hear NPR direct through mobile apps.

NPR Out-Promotes Stations on Their Own Airwaves

For years, NPR has used millions of dollars of member station airtime to promote the NPR.org website. Now NPR is using millions of dollars of member station air time to promote its own mobile apps.

If only there were a comprehensive network plan for helping stations carve out their own space on-line and in the mobile marketplace. If only there were some sort of revenue plan to compensate stations for the station airtime NPR is using to build its direct audience.

But there are no such plans. NPR -- and the other networks -- are driving listeners directly to their sites. That's good for network on-line advertising sales but not necessarily good for station sales or listener contributions.

It doesn't have to be this way. Stations can offer players and apps that are competitive with any of the individual networks. Stations can offer listeners a greater range of programming options by helping listeners access content from all of the networks carried by the station plus locally produced programming.

And stations have to be as aggressive, if not more aggressive, than the networks in promoting web-based services.

We're advising clients to promote their website or mobile app immediately after NPR embeds one of its promos in the news. The same holds true for web-services promos from any other network. Every time listeners hear a promo for a network app or website, they should hear about an even better app or website experience from the station.

To the listeners, this might sound as if the station and NPR are in competition with one another for the their attention. That would be unfortunate but, from the station perspective, it is unavoidable. On-air promotion is one of the best ways to create new mobile and web listeners. NPR understands that. So should stations. And stations should never concede those new listeners to NPR on their own airwaves.

Sound Quaility Less Valued Today

Interesting read from Joseph Plambeck in the New York Times about declining interest in high quality audio.

Of note, the idea that few people today sit and listen to music they way they listened to HiFi in the 60s, 70s. and 80s. It's a good reminder that radio's portability is one of its greatest assets.